Buffett Joins Soros in Effort to Raise Taxes on Estates

Billionaire investors Warren Buffett and George Soros are calling on Congress to increase the estate tax as lawmakers near a decision on tax policies that expire
Dec. 31. Photographer: Joshua Roberts/Bloomberg

Dec. 11 (Bloomberg) -- Billionaire investors Warren Buffett
and George Soros are calling on Congress to increase the estate
tax as lawmakers near a decision on tax policies that expire
Dec. 31.

In a joint statement today, Buffett, Soros and more than 20
other wealthy individuals asked Congress to lower the estate
tax’s per-person exemption to $2 million from $5.12 million and
raise the top rate to more than 45 percent from 35 percent.

An estate tax structured this way will “raise significant
revenue to reduce the deficit and fund vital services, will only
be paid by the top one percent of estates, will raise more from
the wealthiest estates” and will simplify compliance, said the
statement. It also was signed by John Bogle, founder of mutual
fund company Vanguard Group Inc., and former President Jimmy
Carter.

The renewed push for increasing the estate tax faces
significant opposition in Congress, where Senate Democrats
including Max Baucus of Montana and Mark Pryor of Arkansas have
joined Republicans to support the current estate tax parameters.
That intra-party dispute caused Democrats to leave estate tax
changes out of legislation they passed July 25 extending income
tax cuts.

There’s probably enough support among Democrats to maintain
the existing estate tax parameters, said Carolyn Lee, senior
director of tax policy at the National Association of
Manufacturers in Washington, which supports existing levels.

‘Multigenerational Businesses’

“We think that family-held and multigenerational
businesses are important,” she said. “It’s part of the
American way of life.”

Changes to the estate tax are among the more than $600
billion in automatic spending cuts and tax increases scheduled
to start in January.

If Congress does nothing, the amount one could exempt from
the estate tax would drop to $1 million and the rate would
increase to 55 percent. Obama wants to reinstate the 2009
levels, which include a $3.5 million exemption and a 45 percent
top rate. Compared with continuing current policies, Obama’s
plan would raise $119 billion over the next decade, according to
his budget proposal.

Cutting estate taxes just means that someone else will have
to pay for government, Bogle said.

“I’m more than happy for my own estate to pay my fair
share,” he said today on a conference call with reporters.

Taxable Estates

In 2013, under the plan favored by Republicans, there would
be an estimated 3,600 taxable estates in the U.S., according to
the nonpartisan congressional Joint Committee on Taxation.
Obama’s plan would double that number to 7,200. If Congress does
nothing, 55,200 estates, or 2 percent of estimated 2013
decedents, would owe taxes.

Buffett, 82, is the chairman, chief executive officer and
largest shareholder of Berkshire Hathaway Inc., and his $46.7
billion fortune as of yesterday places him fourth on the
Bloomberg Billionaires Index.

Buffett has long been a supporter of estate taxes. He
testified before the Senate Finance Committee in 2007 and said
the tax was necessary to “prevent our democracy from becoming a
dynastic plutocracy.”

Buffett has committed most of his wealth to charities,
including the Bill & Melinda Gates Foundation and organizations
started by his three children. He has urged billionaires to
agree to donate at least half their wealth in a campaign he co-founded with Microsoft Corp. Chairman Bill Gates, the world’s
second-richest person, who’s worth $62.7 billion according to
the Bloomberg Billionaires Index.

‘Buffett Rule’

Contributions to charitable groups can be deducted from
annual income and, at death, from the taxable value of an
estate.

Obama has used Buffett’s call for higher taxes on capital
gains to promote the “Buffett rule,” which would require a
minimum tax rate for top earners.

Soros, 82, is chairman and founder of Soros Fund Management
LLC. He is worth $21.6 billion, placing him at 24th on the
Bloomberg Billionaires Index. He has donated more than $3
million to Democrats and has financed groups such as the
American Civil Liberties Union.

Other signers of the statement include Bill Gates Sr.,
father the Microsoft chairman; Richard Rockefeller, chairman of
Rockefeller Brothers Fund Inc.; and Leo Hindery, managing
partner of InterMedia Partners LP.

Rockefeller said on the conference call today that a higher
estate tax rate encourages philanthropy, because it gives
wealthy people an incentive to direct their money to causes.

The $4 million exemption per couple, indexed for inflation,
is adequate, he said.

“Passing along $4 million is not trivial,” Rockefeller
said.

The statement was organized by the Responsible Wealth
project of United for a Fair Economy, a Boston-based group that
opposes concentrations of wealth.